You have to see these gold technical analysis charts for yourself, because something interesting is starting to happen with gold and the stock market.
Gold is starting to trade opposite to the stock market.
On this chart I have put the price of the S&P 500 on it in black. Gold is in red. So you can compare the two.
The indicator on the bottom of the chart is the 20-day correlation of the gold and the S&P 500. When it is at the top at one it means the correlation is 100% and the two things being compared are going up and down 100% together. Since the recent DOW and S&P 500 peak in January the relationship between the two has gone negative.
I have drawn two circles on this chart worth noting. The first one is the period after Trump one the election. Gold dumped and went into a long sideways trading range after his election while the stock market soared.
These trends defined 2017.
The second circle is the time period after the January peak. Gold has strengthened during this time while the stock market has weakened and has become extremely volatile, which is a trend likely to simply continue.
Gold is actually up so far year to date while almost everything, including bonds is down.
Now why is this happening?
I’m not going to get into specific news stories as you can pick your posion, but it is necessary to note that the US corporate bond market has been slowly fading since the start of the year and Treasury bonds have not acted as traditional safe havens this year either. At the same time the US dollar is in a bear market having been in decline for almost a year and a half now.
Put it all together and gold investing is starting to show why it is about to become very important for people going forward.
Now we are at a fascinating situation with the US stock market averages that everyone is focusing on and that is the fact that it is trying to hold its 200-day moving averages. Everyone is hoping it will go up from here and everyone knows that if it falls through this level it will dump again.
This is what everyone is watching.
However, gold is actually in a key situation at this moment as while the stock market is sitting on long-term support gold is on long-term resistance.
This chart makes that clear.
As you can see it is the $1350-$1360 area on gold that is now key long-term resistance in what you could consider to be a reverse head and shoulders price pattern.
What is important now is that gold is right under this $1350-$1360 resistance zone just as the S&P 500 is holding (for now) on its 200-day moving average.
Gold has been acting better than the stock market so if stocks tip down again this month we can expect gold to explode.
A full blown bear market in stocks would drive gold higher and make gold into a necessary investment for people.
I talked about gold and other things happening in the markets yesterday after the close on the Jim Goddard show produced by howestreet.com.
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